I used to think that innovation was a close cousin of risk—that the whole point was venturing into unknown markets to do something that had never been done before. But when it comes to infrastructure public-private partnerships (PPPs), especially those that have a positive, long-term impact on millions of people, I’ve seen enough significant, successful partnerships to understand that innovation doesn’t have to be about creating new things all the time. It’s just as important and valuable to take something that’s new in a particular context and make it work.
Any innovation ecosystem needs early adopters and scalers. The latter group is especially relevant for PPPs that the World Bank Group advises and invests in. Institutions like the World Bank Group can’t compete with smaller, nimbler, and more risk-tolerant firms and social enterprises when it comes to innovating at speed. But when it comes to recognizing PPP approaches that work, World Bank Group advisors can evaluate them rigorously, share the lessons widely, and adapt the models to a variety of contexts. That’s innovating at scale. It’s less about early adoption and more about global adaptation. It’s about anchoring and contextualizing policy and business model innovations within a variety of geographies with different political, social, and economic realities. Even for PPPs, which must be tailored carefully to fit local and regional needs, there can be no “boutique” innovation, which guarantees one-time success. In seeking scaleable solutions, we pursue PPPs—often pilots—whose successes can be replicated.
There’s a great example in progress right now in Benin, where rural water systems have historically been operated by local communities, with uneven success. In 2006, the Government of Benin began to transfer the management of these water systems to private operators under a lease/affermage arrangement. In 2010, the World Bank Water and Sanitation Program (WSP) commissioned an assessment of the performance of the privately-run water systems. It uncovered a number of shortcomings, including the lack of capacity on the part of the local private operators, weak and short-term contracting arrangements, and challenges for all parties in fulfilling their contractual obligations. The World Bank Group worked to strengthen the contractual framework with capital investment from the Dutch Cooperation (the Netherlands Embassy in Benin), which allocated up to $1 million in grants. IFC was the lead transaction advisor, structuring, tendering, and implementing a PPP for ten pilot sites.
A strategic partnership with the WSP played a pivotal role in fulfilling the government’s objective of leveraging the private sector’s capacity to improve the quality and sustainability of water supply in rural areas. Together with WSP, IFC provided strategic recommendations on an appropriate institutional framework, the range of activities to be transferred to the private sector, and a tender and regulatory framework.
So far, it’s a textbook case. But IFC’s experience undertaking these sorts of PPPs across the developing world paid off in an innovation that turned the project from textbook to terrific. The new piece fell into place when IFC worked with local commercial banks to support the sector by providing financing to the concessionaires. It’s a first for Benin. As a result, the financial burden on the public finances will be reduced, as historically the state has fully financed capital investment. Because the project was implemented as a pilot for broader sector reform, scaling-up this approach is the next step. It will include more rural water supply schemes across the country and enable a larger number of people to benefit from improved access to water.
In retrospect, these steps seem perfectly reasonable. But approaching local commercial banks to support the sector had never been attempted before in Benin, nor had the idea of implementing a pilot that would institutionalize these innovations. This illustrates the truism that lessons are seldom earth shattering and usually intuitive. We hear things like “design for growth and scale from the beginning,” “recruit leaders with strong social and political capital,” “learn and adapt as you implement,” “pay attention to process and product,” “work the system top-down and bottom-up simultaneously.” When these elements come together, there’s a foundation that welcomes innovation.
For PPPs, markets and governments are the two surest pathways to scale. For lasting results, public and private actors must work together in ways that leverage the strengths of both. A project that’s both innovative and successful requires discipline in identifying the most promising models no matter where they come from, a willingness to test them and evaluate them rigorously, a commitment to learning what works and doesn’t work, sharing this knowledge widely through communities of learning and practice, and getting really good at adapting models to local contexts. None of that is easy, but it’s essential—because it translates into results.
Innovation for PPPs requires recognizing the precise elements of what works, evaluating those models, generating and diffusing knowledge, and replicating the approach while adapting policies and requirements to local contexts. Innovation doesn’t have to be about creating new things all the time, Benin’s piped-in water PPP demonstrates. It’s just as valuable to try out an approach that’s new in a particular context. This too can disrupt the status quo, transforming the market just as profoundly as it transforms citizens’ quality of life.
Cover illustration by David Sipress | The New Yorker Collection | www.cartoonbank.com.